NBA Lockout 101: Not a pretty picture

We’re just one month into the 2010-11 season, but the prospect that the 2011 NBA Finals and the 2011 draft will be followed almost immediately by a lockout that may threaten to wipe out the entire 2011-12 season continues to bubble up into the headlines.

A meeting this week between NBA executives and the top officials of the players’ union focused attention on efforts aimed at reaching a new collective bargaining agreement that would allow future seasons to continue without interruption.

Out of this conclave came only a statement that frank and direct dialogue had taken place and another meeting would be held next month.

The word “lockout” was absent from the official NBA pronouncement, but it is the elephant in the room whenever the two sides meet, and those on both sides know it.?

Here is a layman’s guide to everything you need to know about a potential lockout many see as inevitable come July?1.?

Read it and weep.

What exactly is a lockout?

Under United States labor laws, both sides in a labor dispute have economic weapon they are allowed to use. The employer has the right to use a lockout, and the employees have a right to strike. They are, in effect, mirror images of one another.

By staging a strike, employees can withhold their services and refuse to show up for work, hoping the disruption in normal operations pressures the employer to negotiate more favorable contract terms.

By law, employers can pressure employees by locking the doors to the workplace and telling employees they can’t come to work. Since the employees don’t work, they don’t have to be paid. This is the ultimate pressure an employer can bring to bear on unionized employees.

What is the process by which negotiations continue during a lockout?

Under U.S. labor laws, the parties are obligated to continue bargaining in good faith. That continues even if a strike or lockout is called. Nothing changes. The law requires both sides to meet, talk and bargain.

Why are negotiations so difficult this time around?

Simply stated, the league contends it is losing hundreds of millions of dollars on an annual basis. Stern has put last season’s losses at $380 million and projects this season’s losses at between $340 million and $350 million. For this reason, the owners are seeking dramatic change, which Stern recently quantified as a swing in profitability of $750 million to $800 million a year. There is really only one way to make such a dramatic swing: Cut player salaries.

With ticket prices already out of range of most middle-income wage earners, how can the teams be losing so much money?

Under the current collective bargaining agreement, the players are guaranteed 57 percent of all revenue generated. The league contends that the cost of generating all that revenue — sales staffs, marketing, etc. — makes it impossible to generate enough revenue to make a profit from the 43 cents on the dollar the owners keep.

Union executive director Billy Hunter called Stern’s projection of $340 million-$350 million “baloney.” Who is right?

Hunter says Stern’s figure includes both depreciation of assets and debt service and contends those accounting items should not be included on the league’s balance sheet because they aren’t part of actual operating costs. Stern won’t back down from his figures. Hence, a major impasse.

Aren’t the players making millions? And didn’t teams leverage the popularity of the 2010 Finals and the buzz from summer free agency into a season ticket sales bonanza this summer?

It is true that the negotiations are pretty much a case of billionaires squabbling with millionaires. Yes, the mid-level player salary is $5.765 million, and the minimum salary is $473,604. But nobody held a gun on Timberwolves owner Glen Taylor to make him give Darko Milicic a four-year, $20 million deal last summer.

Darko Milicic? Really?

If they are locked out, can players go overseas and earn paychecks in other leagues?

Currently, the NBA has an agreement with the international basketball federation (FIBA) designed to make sure players under contract either to NBA teams or FIBA-sanctioned teams overseas do not violate their contracts by playing for other teams. However, if an NBA player doesn’t have a job because of a lockout, the league could not prohibit him from playing elsewhere. This is a gray area, however, because of the relationship between the NBA and FIBA. In any case, an NBA player who went overseas to play during a lockout likely would be required to return to the NBA once a lockout ended, which could have a chilling effect on overseas teams wanting to sign NBA players.